Spain's mini gold rush beset by concerns over development

Tobias Buck

Tuesday, 29 Oct 2013 | 2:56 AM ETFinancial Times

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Until recently, anyone looking for treasure in the Spanish regions of Galicia and Asturias would have been directed to the sea: the waters off the northwest tip of the country are renowned for prized seafood.

However, interest – and controversy – has been growing over the riches on dry land. Buried but apparently ripe for extraction are some of the biggest untapped gold deposits in western Europe.

Edgewater Exploration and Astur Gold, two mining companies based in Vancouver, have invested millions of dollars with the aim of bringing these deposits into production. Edgewater acquired the rights to produce gold at a site called Corcoesto in Galicia in 2010, the same year that Astur Gold took control of the Salave deposit in Asturias.

Together, the sites contain more than 2m ounces of gold, on a measured and indicated basis, but the amount that can be produced profitably is likely to be much lower.

"One of our mandates was to find projects in the EU where politicians wanted to say yes to jobs, in areas where jobs were important," said Cary Pinkowski, chief executive of Astur Gold.

Mr Pinkowski hopes to have final approval from the regional government for the Salave project by the end of the year, and to ramp up production at the site towards the end of 2015. He says his company has received more than 11,000 applications for the 800 jobs Astur Gold hopes to create during the construction phase. The mine itself will need 200-250 workers.

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One prominent example is the Eurovegas mega-casino, backed by Sheldon Adelson, the U.S. billionaire, who has lobbied the government to change local laws on smoking and other issues in exchange for creating jobs.

Galicia and Asturias have unemployment rates above 20 per cent, so are as keen as the rest of Spain to attract employers.

However, Edgewater has discovered that employment concerns do not always seal the deal. Having embraced the project at the start, the Galicia government has backed away in recent months.

The company was told in July that it had to show it had access to an additional €30m in funding before the project could proceed – equivalent to a quarter of the total investment.

"They are killing the game for us," said George Salamis, president of Edgewater. "This has sent a shockwave through our shareholder base and it impedes our ability to finance the project."

Mr Salamis added: "The people of Galicia need this project and they need it now." Edgewater had received 15,000 applications for the 270 jobs the company has promised to create. The mine enjoyed strong backing from locals, but he conceded there was opposition from environmental groups. This is also the case in Salave.

Alberto Núñez Feijóo, the Galician regional president, said this month that the Corcoesto plan could not be approved in its current form. He declared: "Every mining project has to be in strict compliance with environmental laws, business laws and [those] that relate to industry and technical feasibility."

Mr Salamis still hopes that Edgewater will be able to win over the authorities, possibly after bringing in other investors and partners. For his company, however, much of the early enthusiasm over a mini gold rush has started to fade.

"There is tremendous gold potential here," he said. "You can have the best deposit on the planet, but if the government doesn't support you, it's basically worthless."